Re: inheritance taxes/US

123go wrote:

> what in the world is fair about an income tax or a death tax? Shouldn't
> everyone pay the same? Just like when you buy a gallon of milk or go see a
> movie, everyone pays the same. Obviously, some adjustment can be made here,
> but the current tax system is a far cry from "some adjustment". And it
> results in serious unintended consequences.

Everyone pays sales taxes the same, and some parts of the world get a
lot of their funding from a VAT. Such taxes are generally regressive,
putting quite a burden on poor people. After all, how many kitchen
appliances do you need?

There has been some attempt to equalize the burden by designing
progressive taxes that ding wealthy people more than poor people. The
biggest problem with progressive taxes is that as soon as you draw
lines, inflation starts moving the lines. As Norma pointed out,
$500,000 isn't much money nowadays. It's certainly not enough to live
on, unless your needs are very modest. Thirty years ago, $500,000
would have been considered quite a fortune. If you want to be fair, it
is unfair to tax modest estates at a high rate.

The value of paper currency has never held up, while the value of real
estate has almost always increased faster than inflation. My parents
bought a farm in 1961, for $64,000. Granted, there have been some
substantial improvements. The biggest improvement was irrigating the
entire place, which easily tripled the value of the land. However, the
dollar value of the farm is now somewhere north of $1 million. If
they sold out now, capital gains would be huge, when the actual return
on the investment has been much more modest.

You also need to realize that the primary reason for death taxes is not
to fund the government, it is to preserve a middle class. For most of
human history, a few wealthy families owned everything, including the
population. It has been rare for a healthy middle class to exist, and
they usually don't last long. It is not so important how much wealth
people have as a general equality of wealth. In the past, it has been
somewhat traumatic for the US to break up vast concentrations of
wealth. You may remember the forced dismantling of Bell Telephone,
which was a recent action that, in the long run, benefitted us all. A
century ago, Teddy Roosevelt was "trust busting" because the middle
class was being damaged by monopolies. Vast concentrations of power
are never good news for the general public.

.

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